Q. "Experts" say I can get in trouble by running up the credit cards that are part of this HELOC system. Is this true ?
A. If you "max out" credit cards and do not pay them, you can get into trouble under any system. You have to follow the terms that you set down for yourself when you got these cards in the first place.
BUT under a traditional system, you have to find money for your mortgage as well as your credit cards. So if you cannot find extra money if you are in trouble, your lender may demand payment and, in the worse case, sell up your house to meet the debt.
There is a certain irony in that, isn't there?
BUT under a HELOC scenario, you can withdraw without penalty up to (usually) 80% of the value of the property which should be more than enough to pay out the credit card. After all, the lender may have gone close to 80% of the property valuation when they gave you the mortgage and thus they have already agreed to that legally. (We will actually see this in later discussions.)
HOWEVER getting into trouble with credit cards can happen under any system. It is the human, not the system, that causes the problem. Now you see though, that by segregating the credit card obligation and the mortgage obligation, the difficulty is actually compounding. Some cynics may suggest that this is a deliberate ploy by some lenders.